Preparation is instrumental to the success of the negotiation process. Being well-prepared generates confidence and gives an edge to the negotiator. Preparation involves the following activities:
- Gathering Information: One needs to learn as much as one can about the problem and ascertain what information is needed from the other side. Understanding clearly the issues involved are also needed.
- Leverage Evaluation: Evaluation of one’s leverage and the other party’s leverage at the outset is important because there may be a number of things one can do to improve one’s leverage or diminish the leverage of the other side.
- Understand the people involved: It is important to know the people with whom the negotiation is to take place. An understanding of their objectives, roles and the issues likely to be raised by them will facilitate better handling of the situation during the negotiation process.
- Rapport: It is helpful to establish a rapport with the opponent during the early stages, that is, before the bargaining process begins is helpful. This was, one can determine early on how cooperative the opponent is going to be.
- Know your objectives: Clarity of objectives is absolutely essential. It needs to be decided in advance how much you are willing to concede to the opponent and what your priorities are. All arguments and justifications should be ready.
- Type of negotiation: Anticipate the type of negotiation expected, that is, ascertain whether it will be highly competitive, cooperative or something unusual; whether the negotiation will be face to face, by fax, through a mediator, or in some other manner.
Here the two sides come face to face. Each party tries to make an impression on the other side and influence their thinking at the first opportunity. Psychologically, this phase is important because it sets the tone for the negotiation to a large extent. It involves both negotiating parties presenting their cases to each other.
The bargaining phase involves coming closer to the objective you intended to achieve when you started the negotiation. In this phase, the basic strategy is to convince the other side of the appropriateness of your demands and then persuading the other party to concede to those demands. For this, one needs to be logical in one’s approach and frame clearly-thought-out and planned arguments.
The closing phase of a negotiation represents the opportunity to capitalize on all of the work done in the earlier phases. The research that has been done in the preparation phase, combined with all of the information that has been gained is useful in the closing phase. It also involves the sealing of the agreement in which both parties formalize the agreement in a written contract or letter of intent. Reviewing the negotiation is as important as the negotiation process itself. It teaches lessons on how to achieve a better outcome. Therefore, one should take the time to review each element and find out what went well and what needs to be improved.
In Sales Terms
Planning, as we’ve already noted, is essential in the cascade. If you don’t prepare, you may open the negotiation, but you won’t know what you want! Or what the buyer wants. Or what challenges and obstacles you might face. You won’t know what tone you want to set or how to set it. You’ll be winging it, not able to set a purposeful agenda for negotiation success.
Not only must the seller be the choreographer of the show, they must also be the conductor of the band.
Let’s assume you are negotiating in a meeting. You’ve made your plan and you know what you want for outcomes. You know who is at the meeting and their objectives, desires, challenges, skepticisms, requirements, and so forth. You also know the buyer’s buying process.
Engaging the buyer means taking the lead and setting the tone. It means collaborating with confidence and maintaining a peer-to-peer dynamic. It also means opening the discussion yourself whenever possible.
For example, let’s say it is time to talk about pricing. Common advice for sellers is to ask buyers for a budget, or to let the buyers go first with setting a price range for what they plan to spend on your offerings.
This isn’t typically good advice.
Most often sellers can feel their stomach drop when a buyer first mentions a budget. It’s rarely enough, leaving the seller to backtrack and explain why, if the buyer wants to achieve their desired objectives, it will need to be higher.
When it comes to facilitating, this is where you open the door as much as possible to collaborating. Collaboration, as we know from Essential Rule of Sales Negotiation #2: Build Value, deepens relationships and trust while creating a sense of psychological ownership in the buyer.
If you leave it to the buyer or anyone else to facilitate, they may engage in unhelpful tit-for-tat zero-sum bargaining or arguing about positions on pricing and terms. Facilitate the discussion to avoid getting derailed.
Like leading in general, facilitating doesn’t mean doing all the talking. It’s about guiding the discussion down the right paths. In fact, it’s often better to talk less. Ask the right questions and you can guide the discussion properly while, at the same time, allowing buyers to feel connected and engaged. When they come up with ideas that are fruitful, you can allow them to own those ideas, showing them you think the ideas are productive and helpful. Then they will also feel respected and valued.
Finally, when it comes to commitment, it’s up to you to close the discussion when it’s time. We’ve seen too many sales where a verbal “yes” turns into a “no” over time because the agreement wasn’t buttoned up, or it wasn’t buttoned up fast enough.
To the first point, there’s quite a bit of research on how to make sure the commitment that you gain is durable. For example, influence researcher Robert Cialdini found that commitments that are verbal, written, and public are much more likely to be kept than those that are verbal or verbal and written only. At the end of negotiations, sellers should get verbal agreement. Listen and confirm that buyers are ready to move forward.
Then the seller should summarize what they agreed to, and let buyers know they will write it up immediately and send to the buyer for confirmation which they’d appreciate a “yes” reply to make sure they didn’t miss anything. And then, as possible, get the buyer to announce internally they are moving forward, even if a contract has not yet been signed.